In this experiment, we test whether the Domar-Musgrave model accurately predicts investor behavior in its paradigmatic setting. Our results indicate that investors only scale up their investments in risky assets to the extent predicted by the model when tax rates are relatively low. Moreover, we...

Traditional analysis of tax policy has generally used either the Expected Utility Model or the closely related Subjective Expected Utility Theory to describe how individuals behave under risk and uncertainty. However, the accuracy of this theory has been under attack for a number of decades....

In this paper, we consider the experiments that have been conducted to date on the effects of income taxes on the willingness of investors to take on risk. Interestingly, different experiments yield different conclusions about the effect. Some indicate income taxes increase risk-taking, while...